Bankruptcy vs. Consumer Proposal

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What are the pros and cons of filing for bankruptcy vs. Consumer Proposal in Canada?

By declaring bankruptcy, you’re protected from creditors and free from most of your debt, but there are disadvantages to consider as well. It can be confusing trying to decide between Bankruptcy vs. Consumer Proposal.

Many of our customers find alternative debt relief options to bankruptcy that they never considered before speaking with us.

In most cases, a Consumer Proposal is the best option, as it has more advantages than personal bankruptcy.

If your income increases after declaring bankruptcy, your monthly payment will also increase.

With a Consumer Proposal, your payments do not change.

Bankruptcy Advantages

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Stay of proceedings

Calls from collection agencies will STOP! Thanks to the Bankruptcy and Insolvency Act, wage garnishments and threats of lawsuits will also stop immediately.

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Cost effective

A personal bankruptcy in Ontario can costs less than other debt relief options. The exact cost depends on your income and assets.

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Quick process

At David Sklar, we’ll make every process easy for you, but personal bankruptcy is a particularly quick process. Many individuals can receive an automatic discharge within nine months.

Bankruptcy Disadvantages

Negative Impact to your credit score

Your credit report will show a record of your bankruptcy claim for six years after discharge and you will lose all of your credit cards.

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Loss of assets

When you file for personal bankruptcy, your licensed Insolvency Trustee will inform you of the assets can keep, and which you will lose. Your Trustee will calculate the value of the equity you have in your home, your investments, and other non-exempt assets, and distribute the proceeds to your creditors. During the bankruptcy period, any tax refunds you may receive will go to your creditors as well.

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Debts that can not be eliminated

Child support, alimony, fines, and some student loans are excluded. Secured debts (such as mortgages) are also not covered in a bankruptcy.

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Impact on employment

You must consider the fact that declaring bankruptcy may have an impact on your employment situation if you are responsible for money or trust funds. While bankrupt, you are not allowed to work as a director of a company.

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Surplus Income

Surplus income is any income earned above the standards set by the Office of the Superintendent of Bankruptcy Canada. You are required to pay half of any surplus income you earn above that amount.

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Added responsibilities

When you claim bankruptcy, you are required to make your regular payments which are based on your income. You must also attend two credit counselling sessions and send a monthly budget statement to your LIT.

Bankruptcy and surplus income payments

Each year the Superintendent of Bankruptcy outlines what they feel is a basic income for different family sizes. When declaring personal bankruptcy your income and size of your family impact the amount you will need to pay and for how long.

Getting into debt is easy. Getting out is a different story.

But it's still possible!

Did you know there is a Canadian debt relief program federally regulated by the Canadian Government, designed to help citizens avoid claiming bankruptcy? This amazing program can only be administered by a Licensed Insolvency Trustee (LIT).

If you’re struggling to make your payments every month and creditors won’t stop calling, we can help.

What our clients are saying.

Based on 765 reviews
The team at David Sklar and Associates Inc are very professional and are willing to help you get out of debt. Highly recommended.
12:35 03/29/23
I would like to thank the team at David Sklar and associates inc. for all the time and effort they put in to support this process for me. This topic can be challenging to disclose but a big thank you to Christine for going above and beyond in guiding me through all my options and supporting me through the decisions. I cannot recommend this group enough , as they have shown me compassion , knowledge , and understanding throughout the entire process. I look forward to the next step of this process and learning how the proper way of becoming financially educated through the support of their financial counselling team. For anyone who is struggling , just know that there is a wonderful group of educated professionals at David Sklar who are available to help!
18:45 03/14/23
It took me awhile to get up the courage to contact David Sklar but I’m so glad I did. Trina walked through my options with me and provided the knowledge I needed to make a decision to help turn my financial situation around. She is patient and empathetic and answered any and every question that I had. Trina provided me the reassurance I needed that I was making the best decisions for me and my family. I’m so happy that I reached out and now have a plan to get back on track.
19:59 03/12/23
Trina was very helpful and thorough.
15:26 03/12/23
Christine was very helpful, kind, and understanding. She explained everything thoroughly, answered any questions I had, and was responsive to any concerns I had. 100% would recommend
17:29 03/08/23
Jackie Stanley is excellent she took the time to explain everything to me and I am so grateful to her for giving me a fresh financial start so if you have any doubts don’t and go see her if you want to achieve financial freedom!
21:24 03/06/23
Amazing friendly staff that knows what they are going. They make a difficult situation not so bad. Would give 10 stars if I could.
22:37 02/25/23
Very helpful and kind and gave me all the available options before helping me decide which one was best for me. I would definitely recommend Jackie
01:01 02/21/23
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We are David Sklar

Our team of Licensed Insolvency Trustees in Ontario can help you get out of debt and in control of your own financial future. We’ve helped thousands of people and we can help you too. 

We know this is stressful, but you're not alone.

It’s going to be okay.
Book your free consultation today. We’ll do the rest.